Duke Energy Corporation (Holding Company) · NYSE:DUK
Duke Energy Corporation (Holding Company) — Q1 2014 Earnings Presentation
56 slides from Duke Energy Corporation (Holding Company)'s earnings presentation, May 7, 2014
Slide 1: Earnings Review and Business Update
Earnings Review and Business Update May 7, 2014 | First Quarter 2014 Lynn Good, President and CEO Steve Young, Executive VP and CFO
Slide 2: Safe Harbor
Safe Harbor Safe Harbor statement Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to t
Slide 3: Topics for today's call
Topics for today’s call Duke Energy value proposition Business update – Dan River & coal ash management – Winter storm response – Fuel and joint dispatch results – Edwardsport status Strategic update – Commercial businesses – Growth investment opportunities 1Q-2014 earnings review and financ
Slide 4: Duke Energy value proposition
Duke Energy value proposition Superior Total Shareholder Return (TSR) Potential Long-term EPS growth of 4-6% (1) R Attractive annual dividend yield (~4.3%) with growth flexibility (2) ~8.3%-10.3% average annual TSR potential Strong balance sheet Operate in constructive regulated jurisdicti
Slide 5: Dan River coal ash discharge
Dan River coal ash discharge Dan River Steam Station Pond Diagram Sealed Storm Water Pipe – Costs related to remediating the Dan River site as well as the river will be borne by the company (1Q 2014 costs ~$15 million); total remediation costs are not expected to be material – Drinking water remains
Slide 6: Long-term coal ash management strategies
Long-term coal ash management strategies Near-term Actions Longer-term Actions 1. Formed dedicated internal task force to address – Preparing comprehensive engineering assessments near and long-term coal ash management system-wide across all jurisdictions in order to complete ash basin closure strat
Slide 7: Our people rose to challenges from extreme winter weather
Our people rose to challenges from extreme winter weather – In February 2014, winter storms impacted our Carolinas service territories – Over 900,000 customer outages – Over 4,200 personnel supported restoration efforts – Storm costs of ~$35 million – In March 2014, the 3rd largest ice storm hit our
Slide 8: Post-merger fleet diversity benefits Carolinas customers during extreme weather
Post-merger fleet diversity benefits Carolinas customers during extreme weather Fuel and Joint Dispatch (JDA) savings Quarterly Savings Results Guaranteed $687 million in fuel and joint $M $M $50 $300 dispatch savings to Carolinas customers over 5 years (1) $40 $250 – During 1Q 2014, price volatilit
Slide 9: Edwardsport IGCC plant operational status on track
Edwardsport IGCC plant operational status on track Operational Status IGCC Rider Proceeding Next Steps – Plant began commercial operations in Tracker Costs Thru Filed Hearing June 2013 IGCC-11 Mar. 2013 May 2013 Complete; awaiting order – Remain focused on final performance IGCC-12 Sept. 2013 Dec. 2
Slide 10: Planned exit from Midwest generation
Planned exit from Midwest generation – In February, announced process to exit Estimated Timeline merchant generation business in the Midwest 2014 2015 – Exit reduces business risk of Duke Energy Complete asset transfer – DE Ohio becomes a pure T&D company (1) Receive indicative and – Net assets cl
Slide 11: International: Strong results despite low rainfall in Brazil
International: Strong results despite low rainfall in Brazil Brazilian hydro conditions International owns and operates – Reservoir levels at the end of April 2014 were below 4,600 MW of net generation normal; ~39% versus ~62% in April 2013 – Production from thermal generation preserving reservoirs
Slide 12: Potential growth investments of $16-20B from 2014-2018
Potential growth investments of $16-20B from 2014-2018 New Generation Infrastructure Compliance Received CPCN for W.S. Lee Announced Natural Gas EPA regulations, including CCGT in SC Pipeline solicitation with existing and potential air, water Strong response to regulated Piedmont Natural Ga
Slide 13: 1Q-2014 earnings summary and key drivers
1Q-2014 earnings summary and key drivers Adjusted diluted EPS 1Q-2014 Key adjusted segment income drivers (2) REGULATED UTILITIES (+$81 million) +$0.11 ▲Increased pricing and riders +$0.12 ▲Favorable weather +$0.08 ▲Increased weather-normalized retail volumes (+2.6%) +$0.06 ▲Increased wholesale net
Slide 14: Regulated Utilities weather-normal volume trends
Regulated Utilities weather-normal volume trends 1Q 2014 weather-normalized load growth was above full-year expectation of ~0.5% Regulated Utilities weather-normal volume changes – Residential: usage per customer improved to Residential Commercial Industrial Total ~2%, but remain cautious on overall
Slide 15: Financial objectives for 2014 and beyond
Financial objectives for 2014 and beyond Achieve Grow 2014 EPS guidance EPS 4 - 6% $4.45 - $4.60 (1) through 2016 (1)(2) Grow Maintain strong dividend at 65 - 70% credit ratings and target payout (1) balance sheet (1) Based on adjusted diluted EPS. (2) Long-term adjusted diluted EPS growth rate of 4
Slide 16: Appendix materials
Appendix materials Item Slides Update on Key 2014 Assumptions 17-20 1Q 2014 Earnings Supplement 21-26 Environmental Overview 27-33 Coal Ash Supplement 34-40 Additional Financial Information 41-48 Upcoming Events 49 16 | First Quarter 2014 Earnings Review and Business Update
Slide 17: Update on Key 2014 Assumptions
Update on Key 2014 Assumptions 17 | First Quarter 2014 Earnings Review and Business Update
Slide 18: Business segment structure
Business segment structure DUKE ENERGY REGULATED COMMERCIAL INTERNATIONAL UTILITIES POWER ENERGY North and South Duke Energy Duke Energy Carolinas Carolina Renewables North and South Duke Energy Duke Energy Progress Carolina Retail Duke Energy Florida Florida Duke Energy Indiana Indiana Ohio T&D Mid
Slide 19: Update on key 2014 earnings guidance assumptions
Update on key 2014 earnings guidance assumptions ($ in millions) 2014 2014 YTD assumptions (thru 3/31/14) Adjusted segment income (expense) (1): Regulated Utilities $2,855 $737 International Energy $430 $130 Commercial Power $130 $10 Other ($215) ($48) Duke Energy Consolidated $3,200 $829 Additional
Slide 20: ~$5 to $6 billion of environmental compliance costs through 2023
~$5 to $6 billion of environmental compliance costs through 2023 – Anticipate ~$5-$6 billion in Carolinas (1) 2014 – 2016 2017 – 2023 compliance costs for approved Mercury Controls/Sorbent Injection or pending air, water and waste Response to Emissions Standards regulations over next 10 years Wastew
Slide 21: 1Q 2014 Earnings Supplement
1Q 2014 Earnings Supplement 21 | First Quarter 2014 Earnings Review and Business Update
Slide 22: Regulated Utilities normalized volume trends, by jurisdiction
Regulated Utilities normalized volume trends, by jurisdiction Q1 2014 Rolling 12-month Volume Trends Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Regulated Carolinas Progress Florida Indiana Ohio/Kentucky Utilities 5.1% 4.2% 2.5% 2.5% 2.2% 2.0% 2.0% 1.8% 1.7% 1.7% 1.8% 1.5% 1.5% 1.6%
Slide 23: Regulated Utilities quarterly weather impacts
Regulated Utilities quarterly weather impacts Weather segment 2014 2013 income to normal: Pretax impact Weighted avg. EPS impact – Pretax impact Weighted avg. EPS impact – ($ in millions) diluted shares favorable / ($ in millions) diluted shares favorable / (unfavorable) (unfavorable) First Quarter
Slide 24: Wholesale sales growth provides earnings support
Wholesale sales growth provides earnings support – 2014 total wholesale net margin is Wholesale Net Margin expected to be ~$1.1 billion – New long-term contracts in the Carolinas – New 20-year contract with NCEMC at $1 B Duke Energy Progress began in 2013 – 18-year contract with Central EMC at Duke
Slide 25: Edwardsport IGCC rider summary
Edwardsport IGCC rider summary Six-Month Revenue Tracker Costs Thru (1) Filed Approved Requirement IGCC-1 Feb. 2008 May 2008 Jan. 2009 $ 8 million IGCC-2 Sept. 2008 Nov. 2008 May 2009 $ 17 million IGCC-3 Mar. 2009 May 2009 Dec. 2009 $ 27 million IGCC-4 Sept. 2009 Nov. 2009 Dec. 2012 $ 49 million IGC
Slide 26: Brazil's reservoir levels – SE region
Brazil’s reservoir levels – SE region 90 Reservoir Level (% Maximum 80 70 63.75 62.45 62.90 60.83 Volume) 54.13 60 55.06 48.71 50 43.18 45.48 45.05 43.18 40.30 41.62 38.80 40 34.60 36.30 28.86 37.46 30 20 10 2000 2001 2012 2013 2014 0 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec – In 1Q 2014,
Slide 27: Environmental Overview
Environmental Overview 27 | First Quarter 2014 Earnings Review and Business Update
Slide 28: Pending environmental regulations
Pending environmental regulations Rule overview Potential impacts to Duke Energy Regulates Hazardous Air Pollutants (e.g., mercury & non-mercury HAPs) Additional air emissions control Mercury and Air EPA published final rule on February 16, 2012 equipment Toxics Standards Rule Compliance dea
Slide 29: Pending environmental regulations, cont.
Pending environmental regulations, cont. Rule overview Potential impacts to Duke Energy Regulates coal combustion residuals (e.g., coal ash) Close or upgrade wet ash ponds Coal Combustion Rule proposed in June 2010 Convert wet ash handling to dry Residuals Rule (CCR) EPA expected to finali
Slide 30: Pending EPA regulations will impact U.S. generation
Pending EPA regulations will impact U.S. generation Major regulations Duke Energy domestic generation (as of 3/31/14) Considerations for EPA Coal Combustion Coal generation profile Transition period must Residuals Rule TODAY – POST MODERNIZATION (2) – be reasonable to allow 21.8 GW (1) 7%4% 20.2 GW
Slide 31: Positioning our coal fleet for EPA regulations
Positioning our coal fleet for EPA regulations Coal generation profile – as of 3/31/14 Plans for coal generation without controls Duke Carolinas 4.3 GW 2.5 GW 0.4 – Lee 1&2 ~200 MW potential to be retired by 2015 ~7.2 GW GW – Lee 3 ~170 MW expected to be converted to gas in 2014 Duke Progress 3.3 GW
Slide 32: Duke Energy steam facility data (As of 3/31/14)
Duke Energy steam facility data (As of 3/31/14) Owned capacity – Current cooling Ash Handling Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type method Air Emissions controls (flyash; bottom ash) (3) Regulated In Operation DE Carolinas Allen 1,127 Coal Once-Throu
Slide 33: Duke Energy steam facility data, cont. (As of 3/31/14)
Duke Energy steam facility data, cont. (As of 3/31/14) Owned capacity – Ash Handling Structure Operating state Jurisdiction Steam unit facility summer rating (MW) Fuel type Current cooling method Air Emissions controls (flyash; bottom ash) (2) Scrubber; SCR Under Wet Sluice (Dry Under Regulated In O
Slide 34: Coal Ash Supplement
Coal Ash Supplement 34 | First Quarter 2014 Earnings Review and Business Update
Slide 35: Ash Basins: Coal ash background
Ash Basins: Coal ash background Facts About Coal Ash Destinations of Coal Ash in the US According to the U.S. Energy Information Administration, about 37 percent of all Mines electricity generated in the United States 8% comes from coal. In the Carolinas, Duke Energy produces Landfills about 28
Slide 36: Immediate actions following Dan River coal ash accident
Immediate actions following Dan River coal ash accident 1. Formed dedicated internal task Site Baseline coal ash basin plan in NC (1) Timing Cost (est.) force to address near and long-term Dan River Dewater, close and excavate to lined structural fill 20-24 mo. (2) coal ash management system-wide so
Slide 37: North Carolina coal ash plan cost estimate comparisons
North Carolina coal ash plan cost estimate comparisons (1)(2) The comprehensive, long-term closure strategy to be developed for remaining sites by the end of 2014 will be a site-specific, fact-based approach. $B Movement to full excavation and all dry handling significantly increases expected costs
Slide 38: Terms and Background
Terms and Background Fly ash – A fine material similar to the consistency of talcum powder. Fly ash accounts for about 78 percent of the coal ash generated annually in the United States. When many early coal plants were built, fly ash was emitted through smokestacks; later, emissions equipment captu
Slide 39: Ash Basins: Notice of Violations in the Carolinas
Ash Basins: Notice of Violations in the Carolinas Site NOV Duke’s NOV Cited Violation Duke’s Response Summary Next Steps Issuance Response Dan River 2/28/2014 3/13/14 Notice of unlawful discharge and – Duke Energy was operating in full compliance Awaiting action from NC potential issuance of civil p
Slide 40: Ash Basins: Dedicated company website
Ash Basins: Dedicated company website Visit: www.duke-energy.com/ash-management for up-to-date information 40 | First Quarter 2014 Earnings Review and Business Update
Slide 41: Additional Financial Information
Additional Financial Information 41 | First Quarter 2014 Earnings Review and Business Update
Slide 42: Achieving long term earnings growth of 4-6% through 2016
Achieving long term earnings growth of 4-6% through 2016 (1) Adjusted diluted EPS summary (1) EPS CAGR Long-term segment earnings drivers Contribution Thru 2016 Regulated Investments in regulated fleet 4% Utilities Long-term load growth of 0.5 – 1.0% 1 - 2% Wholesale and customer program growt
Slide 43: Established track record of dividend growth
Established track record of dividend growth DUK annual dividend per share (1) Supported by strong regulated earnings 88-year history of quarterly cash dividends Increased quarterly dividend $0.015 to $0.78/share in 2013 Target long-term payout range of 65 - 70% of adjusted diluted EPS Flex
Slide 44: Simplified financing structure
Simplified financing structure Duke Energy (HoldCo) Cinergy Corp. Duke Energy Progress Energy (HoldCo) International (HoldCo) (1) Duke Energy Duke Energy Duke Energy Duke Energy Duke Energy Carolinas Ohio Indiana Progress Florida Duke Energy Commercial Paper and LT Financings Duke Energy Money Pool
Slide 45: Progress on 2014 financing plan
Progress on 2014 financing plan (as of May 7th 2014) (1) ($ in millions) $2,000 $1,500 $1,000 $500 $- Duke Duke Duke International Renewables Duke Duke Energy Energy Energy Energy Energy (HoldCo)(2) Progress Florida Ohio Carolinas Full-year Maturities Expected issuances remaining Completed issuances
Slide 46: Access to capital – Recent long-term debt financing activity
Access to capital – Recent long-term debt financing activity Amount Credit Ratings ($ in Entity Date Issued Term Type Rate (M/S&P/F) millions) Accounts Receivable Initial variable rate of $225 DE Florida March 2014 N/A 3 Year securitization ~0.85% Aa2 / A / A+ $400 million – 30 year First Mortgage B
Slide 47: Liquidity summary (as of March 31, 2014)
Liquidity summary (as of March 31, 2014) ($ in millions) Duke Duke Duke Duke Duke Duke Duke Energy Carolinas Progress Florida Indiana Ohio Kentucky Total Master Credit Facility (1) $ 2,250 $ 1,000 $ 750 $ 650 $ 700 $ 550 $ 100 $ 6,000 Less: Notes payable and commercial paper (2) (858) (300) - - (150
Slide 48: Credit ratings (as of May 7, 2014)
Credit ratings (as of May 7, 2014) Holding companies Operating companies Fitch Moody's S&P Fitch Moody's S&P DUKE ENERGY Stable Stable Stable DUKE ENERGY CAROLINAS Stable Stable Stable Senior Unsecured Debt BBB+ A3 BBB Senior Secured Debt A+ Aa2 A Commercial Paper F-2 P-2 A-2 Senior Unsecured Debt A
Slide 49: Upcoming events
Upcoming events Event Date 2Q 2014 earnings call (tentative) August 7, 2014 3Q 2014 earnings call (tentative) November 5, 2014 49 | First Quarter 2014 Earnings Review and Business Update
Slide 50: For additional information on Duke Energy, please visit: www.duke-energy.com/investors
For additional information on Duke Energy, please visit: www.duke-energy.com/investors
Slide 51: Non-GAAP Reconciliations
Duke Energy Corporation Non-GAAP Reconciliations First Quarter Earnings Review & Business Update May 7, 2014 Adjusted Diluted Earnings per Share (“EPS”) The materials for Duke Energy Corporation’s (“Duke Energy”) First Quarter Earnings Review and Business Update on May 7, 2014 include a discussion o
Slide 52: Non-GAAP Reconciliations (continued)
the impact of special items and the mark-to-market impacts of economic hedges in the Commercial Power segment. Due to the forward-looking nature of this non-GAAP financial measure for future periods, information to reconcile it to the most directly comparable GAAP financial measure is not available
Slide 53: Non-GAAP Reconciliations (continued)
most directly comparable GAAP financial measure is not available at this time, as management is unable to project all special items or mark-to-market adjustments for future periods. Adjusted Earnings, Pre-Tax Income* $1,253 Midwest Generation Impairment (1,381) Costs-to-Achieve, Progress Energy Merg
Slide 54: Adjusted to Reported Earnings Reconciliation, Three Months Ended March 31, 2014
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2014 (Dollars in millions, except per-share amounts) Special Items Costs to Economic Achieve, Midwest Hedges Adjusted Progress Generation (Mark-to- Discontinued Total Reported Earnings Merger Impairment
Slide 55: Adjusted to Reported Earnings Reconciliation, Three Months Ended March 31, 2013
DUKE ENERGY CORPORATION ADJUSTED TO REPORTED EARNINGS RECONCILIATION Three Months Ended March 31, 2013 (Dollars in millions, except per-share amounts) Special Items Costs to Achieve, Economic Adjusted Progress Hedges (Mark- Total Reported Earnings Merger to-Market) * Adjustments Earnings SEGMENT INC
Slide 56: Available Liquidity Reconciliation as of March 31, 2014
Duke Energy Corporation Available Liquidity Reconciliation As of March 31, 2014 (In millions) Cash and Cash Equivalents $1,531 Short-Term Investments 6 Subtotal 1,537 Less: Amounts Held in Foreign Jurisdictions (1,206) Less: Unavailable Domestic Cash (86) $245 Plus: Remaining Availability under Mast